As Mrs. Tom Cruise, she lived the kind of rarefied life
few people outside of royalty and its Hollywood equivalent will ever know: a
wedding in an Italian castle, a 10,000-sq.-ft. Beverly Hills mansion, travel in
a personal Gulfstream IV and a style team on call for every carefully
orchestrated red carpet appearance.

Now Katie Holmes calls an upscale
two-bedroom apartment in Manhattan's bustling Chelsea neighborhood home – and
has even been spotted on the subway with her daughter Suri, 7. When she shakes
the paparazzi who still trail her, you could almost forget the last chapter of
her life ever happened.

Writer Emma Pearse nearly didn't notice Holmes
when she ran into the actress filming with a tiny crew on Avenue C on May 29. "I
almost walked by, and there was Katie," says Pearse. "She looked just like Joey
Potter” – her character from the TV series Dawson's Creek. "Really
young and super chill. No one was paying any attention. It was a laid-back
situation."

That's just the way Holmes wants it. A year
after her bombshell decision to upend her life and leave her husband of six
years, the actress, 34, has embraced a lower-key existence as a single mom in
the city.

"She is in her prime," says a source close
to her, "and truly enjoying the life she is creating for herself." For now, her
days are focused on filming her low-budget indie Mania Days, arranging
activities for Suri and emerging for an occasional stylish night out. "She's
shown such strength as a mother and as a woman," says her friend Nina Garcia.

Still, her new life has brought
challenges too – from the bumpy road she has faced career-wise to her anxiety
about dating
again.